The WACC of Flex Foods Ltd (523672.BO) is 9.5%.
| Range | Selected | |
| Cost of equity | 18.20% - 27.80% | 23.00% |
| Tax rate | 23.40% - 25.10% | 24.25% |
| Cost of debt | 7.00% - 9.80% | 8.40% |
| WACC | 7.8% - 11.2% | 9.5% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 1.37 | 2.14 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 18.20% | 27.80% |
| Tax rate | 23.40% | 25.10% |
| Debt/Equity ratio | 4.3 | 4.3 |
| Cost of debt | 7.00% | 9.80% |
| After-tax WACC | 7.8% | 11.2% |
| Selected WACC | 9.5% | |
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for 523672.BO:
cost_of_equity (23.00%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (1.37) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.